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SEBI Asks MCX To Recover Payment Made To CEO Without Prior Approval

SEBI asked the Multi Commodity Exchange to recover money paid to its Managing Director and Chief Executive Officer Mrugank Paranjpe over and above his salary as the bourse failed to secure the regulator’s prior approval, according to two senior executives at the exchange.

The nomination and remuneration committee of MCX approved an ex-gratia of Rs 15 lakh to Paranjpe in June-July last year and the board subsequently approved it, one of the two people cited earlier said requesting anonymity as he is not authorised to speak to the media. But the company failed to seek approval from the Securities and Exchange Board of India, the person said.

Any ex-gratia paid to key managerial personnel doesn’t require SEBI’s prior nod. But changes to the remuneration of a managing director of a financial market intermediary—like an exchange—needs regulatory approval under the Stock Exchanges and Clearing Corporation Regulation, 2012.

It was an oversight, said the second person quoted earlier requesting anonymity. The regulator raised a red flag when the exchange made a routine disclosure to it about the payment.

In response to BloombergQuint’s emailed queries, the MCX said, “We do not comment on any query pertaining to matters between MCX and the regulator.”

SEBI doesn’t have the provision for post facto approvals. All matters regarding exchanges require prior approval. So, the regulator asked the MCX board to recover the ex-gratia paid to Paranjpe and seek fresh approval, said one of the executives quoted earlier.

The company also deferred the postal ballot to seek shareholder nod for the amount already paid.

Paranjpe was appointed MD & CEO in May 2016 for three years. At the time, the regulator approved annual salary including perquisites of Rs 2.20 crore and a variable pay subject to maximum of 30 percent of the salary to be paid in two halves—50 percent in the year after the audited results are announced and the rest on a deferred basis after three years.

Since the nature of additional payment was classified as ex-gratia, it required prior SEBI approval, said one of the people cited above.

Paranjpe’s tenure is up for renewal in May when he completes three years. The board has constituted a selection committee and hired Egon Zehnder for shortlisting eligible candidates. While it’s not clear if Paranjpe has sought a second term, one of the executives cited earlier said this could be a formality as the board would like continuity in strategy and leadership.